Special provisions for the current crisis: Emergency legislation for general meetings 2020

Various European countries already passed emergency legislation which, among other things, enables companies to hold general meetings without physical presence rights and obligations in the 2020 general meeting season. The German legislator is now also drafting appropriate special provisions for the current crisis. The draft “Act to mitigate the consequences of the COVID-19 pandemic in civil law, insolvency law, and criminal procedure law” of March 23, 2020 provides for substantial facilitations for holding general meetings in 2020, which are of considerable importance in practice at present. The law is likely to be passed as early as March 25, 2020.

In detail, the following is governed by the law:

Extension/reduction of time periods

Initially, the period for holding general meetings will be extended from eight to twelve months after the end of the fiscal year. It will therefore be sufficient if the Annual General Meeting for the previous year is held by the end of the current fiscal year. This will, however, not apply to the Societas Europaea (SE). Resolutions of the Management Board on extending the time period will require the consent of the Supervisory Board.

Additionally, the Management Board may reduce the 30-day period for convening the Annual General Meeting by nine days with the Supervisory Board’s consent. The period for convening the meeting will therefore not be extended by the days of the registration period (usually six days) either, so that the reduction from basically 37 days to now 21 days is significant. In these cases, the proof of shareholding will accordingly need to refer to the beginning of the 12th day prior to the meeting for listed companies. With respect to holders of bearer shares, if any, the company must receive proof of shareholding no later than by the fourth day prior to the Annual General Meeting, unless the Management Board provides for a shorter period in the notification convening the Annual General Meeting. Deviating provisions of the Articles of Association will be irrelevant. The periods for notifications according to Section 125 Stock Corporation Act have also been shortened accordingly.

In addition, the period for the receipt of requests for additional items to the agenda for listed and non-listed companies will be reduced to 14 days prior to the meeting.

Other periods under stock corporation law, such as those for making countermotions accessible, will not be expressly adapted by the law.

Online general meetings also permissible without provision in the Articles of Association

The draft law provides for general meetings in 2020 to be held by means of electronic media even in cases where the authorization that would actually be required to do so is missing from the Articles of Association or the Rules of Procedure for the general meeting. The option of transmitting the general meeting in sound and vision, usually via the Internet, is of practical relevance in this respect. In addition to the mere ability to connect for the purposes of (passively) following the general meeting online, shareholders may also be enabled to participate in the meeting and thus exercise all or some of their rights, including the exercise of voting rights, by means of electronic media. In addition, the members of the Supervisory Board may be enabled to participate in the general meeting by means of video and audio transmission.

Contrary to the principle that the general meeting is an event that requires personal attendance and therefore every shareholder must be able to participate physically, the Management Board, with the consent of the Supervisory Board, may now also order for general meeting to be conducted entirely in virtual form, thus without any presence of shareholders or their proxies. In this event,

• the entire meeting must be transmitted by video and audio,
• it must be possible for shareholders’ voting rights to be exercised via electronic communication (voting by postal mail or electronic participation) and for proxies to be issued,
• shareholders must be given the opportunity to ask questions by means of electronic communication, and
• shareholders who have exercised their voting rights via electronic communication must be given the opportunity to object to a resolution of the general meeting.

According to the wording of the draft bill, it will be sufficient to provide for the option of granting voting rights by way of electronic communication (vote by postal mail) for the period until the beginning of the general meeting. In addition, the Management Board will resolve at its own dutiful and free discretion on the manner in which questions will be answered during a virtual general meeting. Shareholders’ right to ask questions may also be limited to questions submitted by electronic communication no later than two days prior to the meeting. If both the exercise of the right to ask questions and the right to vote are limited to the period prior to the meeting, the Management Board may limit itself to answering questions at its dutiful discretion at the meeting while the results of the vote have already been determined. This makes it considerably easier for general meeting service providers and the administration to conduct general meetings. The association between answering questions and voting will, however, be entirely decoupled. Whether such a general meeting format is really desired by the legislator and represents discretionary general meeting organization does not appear to be conclusively clarified.

In addition, in the case of the holding online general meetings, the draft law expressly provides that challenges to a resolution of the general meeting may in particular not be based on a violation of the above provisions on a virtual general meeting, unless it can be proven that the company acted intentionally.

Advance payments on balance sheet profit also permissible without provision in the Articles of Association

Now the Management Board is also supposed to be able to resolve, even without authorization by the Articles of Association, but with consent of the Supervisory Board, to make advance payments on the net profit to shareholders for the year. The statutory restrictions and restrictions placed by the Articles of Association on the amount of such advance payments, however, must continue to be observed. Consequently, no more than half of the amount remaining from the net income for the year after deduction of the amounts that are to be allocated to revenue reserves in accordance with statutory provisions or the Articles of Association may be used for advance payments. Moreover, the advance payment may not exceed half of the previous year's net profit.

Approval resolutions of the Supervisory Board

Notwithstanding any conflicting provisions in the company's Articles of Association or the Supervisory Board’s Rules of Procedure, the necessary resolutions of the Supervisory Board to make use of the simplified rules for the consent to the resolution of the Management Board may be adopted in writing, by phone, or in a comparable manner without the physical presence of the Supervisory Board members o. Objections by individual members of the Supervisory Board to this form of resolution will therefore be irrelevant.

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